The illions – What is a million, billion, trillion?

Politicians, newscasters, business people, and citizens frequently speak of millions, billions and trillions of dollars. These terms have become such a part of our daily vernacular that it seems we no longer have grasp of the vast magnitude of the difference between these amounts.

For most of us, $1 million is still a lot of money. According to the US Census Bureau, the median household income in 2007 was $50,223. Thus, it will take a person/couple 20 years to earn $1 million. If you are fortunate to be in the top 2% of all households, you earn at least $250,000 each year. Assuming a 40-year work life, 50% of all households will earn less than $2 million in their lifetime, and 98% will earn less than $10 million, before taxes.

There was a day when you were rich if you had a net worth of $1 million. Although $1 million may not be worth what it used to be, it’s still a lot of money. In 2004, 90% of all US households had a net worth of less than $400,000, and given the recent economic turmoil, this probably hasn’t risen much in the past six years. You may have a lifestyle that is well above average, but you won’t be living a life of the rich and famous with $1 million.

By simple math, a billion is 1,000 million. It would take you 20,000 years to earn $1 billion if you earn $50,000 per year. If you had a $1 billion, and you lived 100 years, you would have to spend $27,397 every day of your life to spend it all. One billion dollars is a vast amount of money, but it’s still something that I can wrap my head around.

A trillion dollars is a different matter. Want to know what a $1 trillion looks like?
According to another website, it would take a jet flying at the speed of sound, reeling out a roll of dollar bills behind it, 14 years before it reeled out a trillion one dollar bills. You can also check out mint.com to see other equivalents of $1 trillion.

The entire 2009 GDP of the US was approximately $14.3 trillion. Thus, $1 trillion is like taking 7 cents of every dollar spent in the US. The federal government spends about $3.6 trillion a year, and $1 trillion equals about 28% of it. This equates to about $14,000 of spending if you make $50,000.

The illions may sound a lot alike, but there is an exponential difference between a million and a trillion.

Next time you hear someone talk about $1 billion or $1 trillion, take a step back and think about what they just said and the context. It they are nonchalantly talking like it is pocket-money, there is a good chance they really don’t grasp the magnitude of what they said.

Keep this in mind when you read the post tomorrow about the size of the current U.S. budget deficit.